Festive tax stimulus: Will a sales bounce mop up enough GST to plug revenue gaps?

On Saturday, finance minister Nirmala Sitharaman said that rate reductions had been passed on for dozens of items monitored by the Centre, with some prices dropping even more.

India’s average monthly GST collections having stabilized around ₹2 trillion, she added, made space for this consumption spur, which is now expected to attract investment and set off a virtuous cycle of both fuelling each other.

To see how this plays out, GST mop-ups will be tracked. While tax authorities expect a big boom in buying to keep the rate-cut impact minimal, an analysis based on consumption patterns by Surjit S. Bhalla and Rajesh Shukla suggests that a sharp drop in GST intake is likely even if half the overall tax relief gets spent.

Thankfully, this festive season is showing signs of exuberance, with big-ticket items reportedly flying off shelves. If rising sales volumes outweigh the revenue loss of rate cuts to keep India’s fiscal math mostly intact, this bold stimulus would count as a historic policy bet. Let’s wait for the numbers.